Posts Tagged ‘Inflation’

The authorities are waiting for a recession to happen before they act to mitigate its effects, say the govt and its running dogs allies in the media and academia and private sector.

Chris K, a cybernut hero (though he’s no nut) has been KPKBing (on FB) that in the West, the authorities start their mitigation measures before a recession hits. The only defence that the PA govt and central bank can make is that a recession may not happen.

Well given the following signs, does the PAP govt and its running dogs seriously expect that we won’t have a recession? So why not start the mitigating measures?

1 Exports in Singapore fell a disappointing 4.8 per cent in September, after flat growth the previous month, according to latest figures released by International Enterprise (IE) Singapore on Monday (Oct 17).

Non-oil domestic exports (NODX) were hit by a decline in both electronic and non-electronic exports.

Electronic shipments fell 6.6 per cent, following a 6 per cent decline the previous month. The contraction was largely due to ICs (-6.3 per cent), disk drives (-55 per cent) and parts of PCs (-22.4 per cent), IE Singapore said.

Non-electronic exports contracted 4 per cent, in contrast to a 2.7 per cent expansion the previous month. The decline was led by structures of ships and boats (-99.9 per cent), civil engineering equipment parts (-47.6 per cent) and petrochemicals (-6.5 per cent).

Overall, shipments to seven of Singapore’s top 10 markets fell, with Malaysia, Indonesia and the US leading the decline. Bucking the trend were exports to Hong Kong, the European Union and South Korea, which rose between 9.9 per cent and 23.8 per cent.

2 The Singapore dollar fell to a seven-month low on Friday (Oct 14), as a disappointing growth report card and a dovish policy statement from the central bank fuelled concerns over the outlook of the economy.Gross domestic product (GDP) for the third quarter grew by a slower-than-expected 0.6 percent on-year, compared with forecasts of 1.7 per cent from a Reuters poll. Economic growth also contracted 4.1 per cent on a quarter-on-quarter basis, well off expectations for 0.3 per cent growth.

3 Retail sales in Singapore fell 1.1 per cent in August compared with the previous year, with all sectors except motor vehicles in the red, according to figures released by the Department of Statistics (SingStat) on Friday (Oct 14).

4 While manufacturers have been under siege for some time on the back of flagging global trade, economists are also becoming concerned about the service sector. “The drag from (weak external demand) has now permeated into the core of the Singapore economy,” said Ms Ling.

The service sector has now logged three consecutive quarters of quarter-on-quarter contraction. The last time this happened was during the global financial crisis, said ANZ economist Ng Weiwen.

“(This reinforces) our view that tough times are here to stay for Singapore, with growth running the risk of remaining stuck in low gear,” he added.

A prolonged service sector slowdown will lead to more layoffs going into next year, given that the sector employs 72 per cent of the workforce, noted UOBeconomist Francis Tan. “We should be prepared for worse to come,” he added.

The only sector that logged an uptick in output in the third quarter was construction, which grew 2.5 per cent over last year.

Government forecasters expect growth to come in at the lower end of 1 per cent to 2 per cent this year.

A Facebook friend (no supporter of Mad Dog Chee or WP) has had it with the views of the PAP administration, its alliies in the constructive, nation-building media and various assotrted PAPPy vermin on Facebook spinning to us that life is cheap for S’poreans here, esp when it comes to food and public tpt and “affordable” housing.

They were responding to the EIU’s survey that S’pore was the most expensive city for expats three yrs in a row: http://www.economist.com/blogs/graphicdetail/2016/03/daily-chart-4

My FB pal grumbled:

I don’t see why must Singaporeans be happy with daily meals of little nutritional value* like lots of simple carbs in white rice, a tiny amount of meat or fish and some vegetables.

Even Asian diets can be have more nutrition like cut down on the simple carbs unless you work in a menial job and add more fruits and vegetables and lean meat.

All these healthier choice will be more costly even if eat at coffeeshop or buy from NTUC and not fine dining or buy from gourmet grocers.

EIU overexagerate the costs of living, even expats eat and live healthy.

While the local media and the Prime Minister Office’s DOS [ I think he means the Department of Statistics] under estimates the cost of living using lowest baseline instead of median expenses.

Our forefathers worked hard so we can have a better life and we continue to work hard so our children can continue to progress.

Please don’t bullshit and tell me I have to work extra hard so that the landlords can huat on rental while my children have to eat less healthier and less nutritious food which affect them vs their peers who are feed better. (not more which leads to obesity)

I agree with them. The PAP administration want us all to live in affordable HDB flats, don’t drive cars, take public transport only and only eat rice, cheap vegerables and cheap cuts of meet. Err what about ministers?

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*One PAPpy lady was trying hard to explain that if we eat simple, cheap food, S’pore is a “cheap” city to live in.

Here I pointed out how lucky Ah Loong was in calling a GE in 2015 before the global economy took a turn for the worse. Here’s another example of his luck.

Recently, while searching my online archives for some historical data, I came across a note to self that I wrote in very late 2014 referencing a piece in the constructive, nation-building media that reported the slow growth in wages since 2011. I commented to self on how this slow growth in real wages would affect the elections in 2015 (Remember by then I had predicted a GE in 2015.). Nominal wage growth barely compensated for the growth in inflation. Inflation was a problem.

I tot that the slow real wage growth since 2011 reported in the article would mean that it would not be possible for the PAP to win big in coming GE.

But were the economists (they are still employed in the banks today) quoted in the report wrong, very wrong because in 2015:

— The median Singaporean worker has seen “significant real income growth” in the last five years – a “really quite unusual” performance when most other countries have seen little or even negative income growth, said Deputy Prime Minister Tharman Shanmugaratnam.

Since 2010, after the global financial crisis, the median household income in Singapore has grown by 18 per cent in real terms – that is, after adjusting for the increase in the cost of living, he noted at a walkabout at Taman Jurong on Sunday (Sep 3) evening.

“We’ve seen very unusual sustained income growth in real terms, not just for the people at the top, but for the middle class – and in fact, the households in the low-income group have seen slightly faster real income growth than those in the middle,” he said. (CNA)

— The bi-annual survey compiled by Towers Watson’s Data Services Practice also revealed that in real terms, salaries in Singapore will rise 4.4 per cent. The salary increase budget for 2016 is expected to increase 4.5 per cent, according to the survey. (CNA in May 2015).

The collapse in inflation in 2014 and 2015 due to the collapse in oil prices starting in October 2014 changed everything when it came to real wages because even if wage increases were “peanuts”, the collapse in inflation would ensure that wages went up in real terms. And the nominal increase in wages were not “peanuts”: The total wage increase in 2014 stemmed from a basic wage gain of 4.9% in 2014 (a slight decrease from 5.1% in 2013), while bonuses remained unchanged at 2.21 months of basic wages in 2014. (NWC Guidelines 2015/ 2016 published in May 2015)

If anyone is interested, here’s my note to self (Explanation: The Italic bits are the original article which paints a really gloom picture of real wages (remember oil prices had started falling only three months earlier in October 2014). The words in normal font were my comments at the time:

Why not possible for PAP to win early elections big

The PAP is deluded if thinks can win big in an early election. Real wage growth has been slow, really slow.

It’s not the usual suspects raising the issue but the constructive, nation-building media allied to the PAP administration.

For those who have placed the blame for slow wage growth squarely on cheap imported labour, this year’s headline figures in manpower would have been sobering Despite sharp pullbacks in manpower inflows in the past few years – to the extent that the percentage of vacancies being filled by Singaporeans rather than foreigners this year hit its highest level since 2011 [Can believe Mom’s data meh?].- average pay cheques, after adjusting for inflation, grew by only 0.4 per cent amid tight labour market conditions.

And if Singapore’s struggles with boosting productivity persist, the picture on the wage growth front next year is unlikely to be any rosier, said economists, especially given the poor global economic outlook. The impending cessation of the Wage Credit Scheme (WCS), which subsidises firms for pay raises, will add another chokehold …

The reality

“Companies don’t want their margin to be squeezed. They want to save more, hold on to a profit margin, to prepare for the next year when there’s no more WCS,” said UOB economist Francis Tan. “Once you increase the wages, it will be hard to move them down again. And if the workers are still not as productive as you want them to be, it can be quite dangerous for the existence of the company.”

Labour productivity contracted 0.8 per cent year-on-year in the third quarter, worse than the 0.3 per cent fall in the first half, figures from the Ministry of Manpower showed. The first half of last year registered a 1.3 per cent decline, but this improved to 0.8 per cent growth in the second half.

The repercussions of flagging productivity, as the International Monetary Fund (IMF) has warned, could extend to the whole of the Republic’s economy. With the tightening of the tap on foreign workers pushing up wages more quickly than productivity, not only will firms pass on the higher costs to consumers, but Singapore’s potential growth and competitiveness could also suffer a blow, the IMF said.

FTs needed

DBS economist Irvin Seah noted: “Businesses are unable to pursue more orders because of this labour crunch. This will also prevent them from increasing their top-line, unless the productivity of the existing manpower is able to improve.”

Besides sluggish productivity growth, OCBC’s Ms Selena Ling said companies face pressure from higher rental costs. Singapore is expected to top the rental forecast for Asia-Pacific cities, with a 25 per cent increase in office rents from this year to 2019, based on a report from property consultancy Knight Frank in September.

In adjusting to these costs, business will take into account the differing flexibility of the various types of business costs. Between rental and wage costs, wages provide a “little bit more room for negotiation”, said Ms Ling.

Agreeing, Mr Tan said many companies have been moving towards higher variable components in wages to help buffer against economic cycles.

Workers who benefit from WCS – those earning below S$4,000 – are not considered as vulnerable as low-wage workers. But given the modest growth prospects next year, some economists speculate that the Government could extend the scheme.

“At this moment, it looks like the United States is showing signs of much more broad-based sustained recovery, while the rest of the world is in different stages of recovery and slowdown,” noted CIMB Research economist Song Seng Wun.

Mr Seah, however, noted that the WCS, which represents a form of government transfer, was never meant to last and that the more sustainable approach to boost workers’ pay is to equip them with the right skills.

PAP returns to its roots

“Although I think our fiscal policies are gradually becoming more socialistic in nature, I think the Government has continued to emphasise the need for self-sufficiency and the notion of meritocracy,” he said. “I think such principles should continue to remain the hallmark of our economic policies.”

Employers kanna pay and pay

Indeed, firms have had no choice but to paymore in the stretched labour market, which workers have been quick to capitalise on.

“And it’s not just the blue-collar workers, but the senior and middle management too,” said RecruitPlus Consulting’s managing director, Mr Adrian Tan.

But inflation is rising too, so no real wage growth/ Growth/ What growrh?

Mr Erman Tan, president of the Singapore Human Resources Institute, added that firms will face pressure to keep wage growth at least on a par with inflation. Core inflation, which indicates the rise in everyday out-of-pocket costs, has been estimated at 2 to 3 per cent next year, higher than the 2 to 2.5 per cent expected this year.

“Inflation is still putting pressure on staff. Firms have to make sure staff have the peace of mind to work, so you can change work procedures, change mindsets and invest in automation, leading to improvement in productivity,” he said.

…in the push for wages to grow because of productivity improvement. In September, the cleaning industry became the first to adopt a skill-wage ladder as a criterion to secure licensing, representing a breakthrough in lifting the pay of a group of workers who have seen their income stagnate. The Progressive Wage Model was also announced for security guards and will be implemented in 2016.

Dollars & Sense a usually financial literate site, published the following PAP administration propoganda on wage growth http://dollarsandsense.sg/debunking-3-myths-about-singapores-wage-growth/?fb_action_ids=429056360617791&fb_action_types=og.comments. Has the site become part of Fabrications About the PAP? Money that good meh? Seriously, a little knowledge (especially of stats) is a dangerous thing.

Myth 1: Wage Growth Has Been Lower Than Inflation

Myth 2: The Lowest Income Families Are Worst Off Because Of Inflation

Myth 3: The Rich Benefitted The Most Compared To The Rest Of Us

Well the myths are not Hard Truths but facts. And the rebuttals rubbish. They are not based on economics.

Myths 1 and 2 completely failed to account for what is commonly known as hedonic price adjustments. Hedonic adjustments are marginal variations to the inflation rate in advanced, matured economies but are significantly higher for developing nations or those who have transit from developing to developed status like Singapore. Hedonic price adjustments are the increase in prices due to qualitiative and esthetic changes in a product or service. An example is the difference in prices between a hawker centre and a food court. The increase in prices when one transit to the other is NOT included in the inflation rate.

Once you understand the effect of hedonic price adjustments, you can then understand why the increase in the CPF Minimum Sum to account for cost of living runs significantly higher than the inflation rate.

Same with Myth 3 which also failed to account for the role of investable income in relation to total income. The top percentile has a much higher proportion of investable income because of the cap in CPF contributions. In an era of elevated real estate prices, those who can invest in a 2nd or 3rd property are those in the top percentile and they earned outsize returns om their investable income. This is why the labour policies of the present government favours the top percentile because the rate of return on investment exceeds wage growth for the rest of the income distribution.

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*Chris K describes himself thus: Chris is a retired executive director in the financial industry who had mostly worked in London and Tokyo.

— Singapore’s consumer price index fell 0.4 percent year-on-year in January, its biggest decline since December 2009. Core inflation in January was 1 percent, the weakest since March 2010. (Reuters)
— Singapore’s headline inflation rate fell into negative territory in both November and December, leading to Q4 2014 inflation of -0.1 per cent.

For all of 2014, consumer price inflation fell to 1 per cent from 2.4 per cent in 2013, as housing and car prices eased.

– Core inflation – which excludes accommodation and private transport costs – rose to 1.9 per cent in 2014, from 1.7 per cent in 2013. But this too, has eased in recent months.

– In 2015, the authorities expect headline inflation and core inflation to ease further due to low global oil prices. Also, businesses’ ability to pass on higher wage costs to consumers may be constrained by slow growth, the Monetary Authority of Singapore (MAS) said.

A more effective way is to increase GST rates. And GST rises are coming soon say a tax expert, constructive, nation-building MediaCorp and junior minister for finance Jos Teo. We must ask loudly and at every appropriate opportunity :“After GE, will the PAP administration raise GST rates and by how much?”

The answer, we should want to hear is what Tharman said in 2011 about future GST rises:“As Finance Minister, I have made that very clear in Parliament that at least for the next five years – it does not mean we will raise it in five years’ time – but at least for five years, there is absolutely no reason to raise the GST, because this was the whole idea – we strengthen our revenue base in time. (CNA)

“GDP is growing, but you can’t eat GDP. You can’t even eat employment. Incomes you can eat, if you spend them,” says the Economist, the PAP’s bible, in a post on the US economy, two days ago.

Well going by this tot, the PAP should be afraid, very afraid going into 2015 and a probable election before 2016. The recent data released by MoM. S’porans have no growth in real income to eat. And if they don’t have real growth in income before next GE, 60% mark may not hold.

Because going by MoM’s data, S’poreans are seeing “peanuts” real growth in wages in 2014.

S’pore’s real median income (i.e, income after adjusting for inflation) growth is at its slowest pace since 2009 with the real median earnings rising to just 0.4%, inclusive of the employer CPF contributions.

A DBS economist said that the real income growth of 0.4% for this year is disappointing, compared with 4% last year. “Should the trend continue, it will raise questions over whether the policies made so far to boost productivity, and real median incomes, are working.”

A Barclays Capital economist blamed the slowdown in growth and the property sector as the main reasons for median incomes stagnating. “There are a lot of professionals in the sector, such as lawyers and bankers. When property slowed down, companies were not able to pay good raises since the profit margins were constrained at the top.”

Worse, the “exceptional” 4% in 2013 was partly pulled up by the initial effect of the Wage Credit Scheme launched last year, whereby the Government co-funds the wage increases given to Singaporean employees.

Good piece from TRE (it’s editorial stuff is usually very decent: taz the adv of having a scholar, unlike TOC which has no scholars, only anti-PAP fruscos) dated 29th November.

*MOM said, “The employment rate rose to a new high, as more women and older residents were in the labour force amid a tight labour market and low unemployment. There was sustained growth in incomes in the recent five years, with the income growth of lower income earners keeping pace with that at the middle.”

However, upon reviewing the data, it was observed that Singapore’s real median income (i.e, income after adjusting for inflation) growth is actually at its slowest pace since 2009 with the real median earnings rising to just 0.4%. This is inclusive of the employer CPF contributions.

A DBS economist said that the real income growth of 0.4% for this year is disappointing, noting that it was 4% last year. He said, “Should the trend continue, it will raise questions over whether the policies made so far to boost productivity, and real median incomes, are working.”

A Barclays Capital economist blamed the slowdown in growth and the property sector as the main reasons for median incomes stagnating. He explained, “There are a lot of professionals in the sector, such as lawyers and bankers. When property slowed down, companies were not able to pay good raises since the profit margins were constrained at the top.”

However, the “exceptional” 4% in 2013 was partly pulled up by the initial effect of the Wage Credit Scheme launched last year. Under the scheme, the Government co-funds the wage increases given to Singaporean employees.

The following table was drawn up by ST in its news report today (29 Nov) quoting figures from MOM’s Singapore Workforce report:

Notice that MOM did not report the figure for the real median income growth if the employer CPF contributions were excluded (i.e, employees’ take-home pay does not include employer CPF. It’s locked inside the CPF till old age). ST reported it simply as “n.a.” or “not available”.

However, thanks to a TRE reader, Win battles lose war, he was able to work out that the real median income growth excluding employer CPF contributions is actually -0.6% for this year.

The reader said:

“Actually, you can calculate this missing statistic from the data in the table.

Since nominal and real income growth (including employer CPF) was 1.8 and 0.4% respectively – doesn’t it mean that inflation was 1.4% (1.8 – 0.4%)?

Therefore, with nominal income growth (excluding employer CPF) at 0.8% – doesn’t it mean that the real income growth was -0.6% (0.8 – 1.4%)?”

“What is the reason for this statistics becoming ‘n.a.’ (disappeared)?” he asked.

“Could it be because it may be embarrassing for real income growth to be negative, despite inflation being at around a 6-year low?”

The reader further illustrated that the real income growth is getting worse for Singaporeans in the past 5 years (2009 to 2014) compared to the previous 5 (2004 to 2009):

With this missing statistic, and the real income growth (excluding employer CPF) at -0.1, 1.3, 2.6, -1.9 and 5.8% from 2009 to 2013, we can calculate the annualized real income growth from 2009 to 2014 as 1.4%, compared to the 1.9% (including employer CPF) in media reports.

Even so, with this 1.9% annualized real income growth (including employer CPF) in this past 5 years (2009 to 2014), it is worse when compared to that of the previous 5 years of 2.5% (2004 to 2009).

And these numbers would even be worse for the corresponding figures of real income growth (excluding employer CPF)!

Note that the salary figures in the table above only reflected the incomes of full-time workers. Those of part-time workers were not included.

The reader asked a pertinent question – are the policies of PAP government working? Whatever happened to the following usual rhetoric from the government?

curtailing foreign labour influx will raise incomes

a tight labour market will raise incomes

numerous productivity initiatives and schemes will raise incomes

the Wage Credit Scheme will raise incomes

Skills upgrading will raise incomes

Life getting tougher for Singaporeans

Retiree Michael Ng, 67, reportedly told a Financial Times reporter that life has become “more stressful” of late [Link].

Mr Ng said, “My children have to work very long hours. People have to work hard to maintain their lifestyles, transport costs have already increased these past two years and housing has gone up a lot.”

Indeed, the Public Transport Council (PTC) announced this month that it has started the annual fare review exercise. Public transport operators may submit their applications for fare review to the PTC for consideration by Dec 19.

SMRT’s Vice-President Patrick Nathan told the media, “We seek a better alignment of fares and operating costs, and will be submitting our application for a fare review in the coming weeks.”

Public transport fares were only last adjusted in Apr this year. There was a fare increase of 3.2% – just half of the total fare cap of 6.6%. It means the remaining 3.4% will be brought forward to this year’s fare review exercise.

And MOE has just announced that students entering polytechnics and the ITE next year will have to pay more school fees, with tuition fees raised by 2 to 5%.

Locals enrolling in the polytechnics next year will pay $2,500 in tuition fees per year, up from the current $2,400. For ITE, students will have to pay about $17 and $13 more for the Nitec and Higher Nitec courses respectively. But those hoping to enrol in the ITE’s technical diploma course will have to pay $106 more annually.

Middle-income Singaporeans losing sense of belonging to Singapore

Even the academics noted that the sense of security typically associated with being middle-class has given way to anxiety among such Singaporeans.

“When we think about the middle class, we think of security, comfort and social mobility. But all these are sort of in decline,” said NUS sociologist Tan Ern Ser at a recent forum, which focused on the state of Singapore’s middle class.

Exacerbating the anxiety is the rise in living costs, which has led to many middle-income Singaporeans no longer being able to afford what they think they deserve.

“If the middle class itself is facing threats of long-term unemployment and socioeconomic insecurity, then its value as an aspirational category becomes open to question,” said Dr Lionel Wee, the vice-dean of NUS’ Faculty of Arts and Social Sciences.

SMU economics professor Ho Kong Weng also noted that middle-class Singaporeans now feel less proud about their national identity. Prof Ho said they felt a weaker sense of belonging to the country. And unlike the more mobile rich, they may not have the option to leave the country, Prof Ho said.

Meanwhile, the MOM report also mentioned that unemployment for Singapore residents in their late 20s stood at 5.8% this year, the highest since 2009. For those under 24, the rate was 8.8 per cent.

Diners could soon be paying more for their plate of sushi as the price of fishmeal, the crucial feed for shrimp, prawns and salmon leaps to an all-time high. The commodity has surged to a record [US]$2,400 a tonne, as rising sea temperatures have led to a sharp drop in anchovy catches in Peru, the world’s largest exporter. Prices have surged fourfold in the last decade as supplies have been affected by a change in climate as well as demand increases.

A floral painting by the late US artist Georgia O’Keeffe was sold for US$44.4m at auction recently, setting a record for an artwork by a female artist. Works by great male artists command higher prices.

Minister of State for Trade and Industry Teo Ser Luck told Parliament on Tuesday that consumers could be affected by affected by “pass-through impact” on inflation. “In particular, as some of our food imports and lifestyle and furniture products are transported via the Causeway, the higher land transport cost may be passed on to consumers.”

However, he suggested that any such impact on consumers is expected to be small, as the majority of Singapore’s food imports and lifestyle and furniture products are still transported by sea or air. (BT on Wednesday).

Er eggs and vegetables come via Causeway.

He said that the government would continue to monitor the impact of the toll hikes.

What for? Not as though S’pore will unilaterally lower tolls* if price rises occur.

The Causeway toll hikes could affect the profit margins of some Singapore-based small and medium enterprises or SMEs, even though they are generally expected to have a limited impact on businesses here,

Again “could” should be “will”.

The impact on economic activity is likely to be small because land transport costs constitute a small proportion of total business costs – only around 3 per cent for companies in the manufacturing sector and one per cent for those in services. Even so, Mr Teo noted that some firms could be more affected than others. “In particular, SMEs in the sectors such as the food and wholesale sectors that frequently transport materials and goods across the Causeway would likely see a larger increase in land transport costs. Logistics firms offering trucking services via the Causeway may also pass on the increase in toll charges to SMEs.”

Not “may” but “will”.

Still want to invest in Iskandar, SMEs? Or buy property there?

Update on 12 October at 1.50pm: Look at the increase and tell if that prices will not go up

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*On the issue of matching M’sia’s tolls, the govt is right to match the M’ian tolls and publicly forewarn the M’sians about it. If S’pore doesn’t match, then the M’sians have every incentive to raise prices so as to maximise revenue at the expense of S’pore’s economy.. By matching, S’pore forces the M’sians to take into account the effect of S’pore matching the rises in its calculations. As to the public forewarning, this shows that having scholars in govt has its uses. It is game theory in action, just like the doctrine of mutually assured destruction which kept the Cold War turning into a nuclear war.

This is how our constructive, nation-building BT reported how GIC is adding insult to injury:

AMID a gloomier outlook for fund managers globally, GIC has racked up annualised real returns of 4.1 per cent over the past 20 years to end-March this year, up from 4 per cent as at end-March last year. This return – above global inflation – was underpinned by a strong recovery in global financial markets, said the Singapore sovereign wealth fund.

Waz the point of this inflation-beating return when the 2.5% CPF rate is below S’pore’s inflation rate? Remember that until recently, we were told the 2.5% rate was justified given that inflation was oneish?

In late July after the June inflation numbers were released which showed core inflation slowed for a second straight month to 2.1 per cent after May’s 2.2%, but a drop to below 2% will be unlikely this year, OCBC economist Selena Ling told MediaCorp..

CIMB economist Song Seng Wun agreed: “The domestic pressure on core inflation hasn’t disappeared. In fact, the pass-through of wage costs to consumer prices has so far been slower than expected, but may become more visible as the economy further recovers.”Core inflation, which excludes accommodation and private road transport costs, is regardeded as a reflection of the wage cost pressure, and the MAS and the MTI retain their 2 to 3% forecast given the tight labour market. Govt’s way of saying, “You want less FTs, we give you slower growth of FTs and higher inflation.”?The official forecast for all-items inflation is being kept at 1.5 to 2.5%, as the Government expects overall prices to ease in the second half due to lower imputed rentals and car prices, with Certificate of Entitlement quotas expected to rise more than expected*.

Especially as our CPF monies do find their way into the pool of funds managed by GIC. Not that this s any secret exposed by Roy Ngerng. I blogged about this in 2009. And I think TRE reproduced it then.

And one LKY spoke in 2000 or 20001 at a GIC anniversary do about how the CPF monies were converted into a special govt bond and the proceeds flowed into GIC after being mixed with govt surpluses in the Consolidated Fund.

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*Update at 5ooam: Extract from BT of 24 July on inflation

The government has cut its 2014 inflation forecast amid lower car prices and housing costs expected for the second half of the year: it now sees headline inflation coming in at the lower half of its 1.5-2.5 per cent forecast range.

But with domestic cost pressures remaining the primary source of inflation, the government reiterated that core inflation (which strips out accommodation and private road transport costs) will stay elevated at 2-3 per cent in 2014.

The impact of rising consumer prices on households varied across different income groups in the first half of this year. Worst hit were the bottom 20 per cent of households: their larger expenditure shares on food and healthcare costs meant they experienced a higher inflation rate (excluding imputed rentals on owner-occupied accommodation) at 2 per cent, compared to the middle 60 per cent income group and the richest fifth of households (both at 1.7 per cent).

CIMB and DBS economists agreed that much of the increase in food and healthcare costs was the result of ongoing restructuring efforts, where a tight labour market has pushed costs (and therefore prices) up.

Said DBS’s Irvin Seah: “Restructuring is inflationary in nature, and it will affect everything. Even if we are unable to bring healthcare costs lower, we should try to moderate the pace of increase.”

According to a report released by the Department of Statistics (DOS) yesterday, Singapore households experienced a 1.7 per cent inflation rate in the first half of this year compared to the same period in 2013. This was lower than the 1.9 per cent rise seen in the preceding six months.

Excluding imputed rentals on owner-occupied accommodation, the consumer price index (CPI) went up by 1.7 per cent in H1 2014 – slightly higher than the increase of 1.5 per cent in the second half of 2013.

As for the second half of this year, the government expects headline inflation to ease, due to lower car prices and accommodation costs.

So don’t think ill of the seller for increasing his prices since 2005. In addition, he got to pay the rent.

In the above link, which talks of global food inflation, the reporter interviewed a PRC FT (in a hawkers’ centre) on the rising cost of food in S’pore and in Mandarin. Clip is towards end of article. GG and TRE readers will not be happy that a PRC FT is interviewed instead of a local. and P Ravi will be upset that Mandarin is used, not English. Seriously even I think that the BBC is wrong to give the impression that S’pore is part of greater China, or FT heaven (5 people interviewed for another series, three are FTs, one true blue S’porean and one first gen. P Ravi will be fuming that the two locals are ethnic Chinese.He should complain to the BBC that 7% of the population are ethnic Indians and that they play a huge role in the governance of the country: two out of four of PM’s most trusted ministers are Indians. AWARE will be not be their usual bitchy selves as both are women. Yes, I’m fed-up with AWARE’s triumphalist, patronising and ang moh attitudes-are-best attitude.)

BTW, in general as countries develop people spend proportionally less on food.

Wonder why they don’t crack such jokes this yr? Inflation (excluding COEs) not too looking gd for us and govt

From BT 15th October 2013

Coupled with a tight labour market, the central bank said that core inflation – which excludes costs of accommodation and private road transport – is expected to be 1.5-2 per cent in 2013, and rise to 2-3 per cent in 2014. With upside core inflation risks looming, economists from Nomura, Citi, DBS and UOB say that a tightening of monetary policy in April could be on the cards – particularly if prices rise beyond the government’s comfort zone.

Said Nomura analysts in a report: “Overall, the statement should raise market expectations of the MAS shifting towards an even tighter (foreign exchange) policy stance at the April 2014 meeting.”

Calling such a scenario “definitely possible”, UOB economist Francis Tan said: “It would have to be fuelled by something completely unanticipated, like if oil prices suddenly spike up due to renewed political tensions in the Middle East. Then the MAS will probably move in to tighten the Singapore dollar NEER.”

Well OK, “mini stagflation”, though I’m sure in other countries, the word “mini” would be omitted. But there is the ISA here, while cynical me knows that all investment banks are hungry for biz from Temasek and GIC.

Singapore is experiencing “mini stagflation”, as its inflation is likely to remain high for structural reasons even as growth stays weak this year, said Kelvin Tay, UBS regional chief investment officer, Southern Asia Pacific, at a seminar on Friday.

The restructuring of the economy, shifting from indiscriminate growth to the quality of growth, means lower growth and high inflation. It’s a structural problem, “Singapore is suffering more from structural inflation.” He was speaking at a business outlook forum organised by the Singapore Chinese Chamber of Commerce and Industry and SPH.

Even though the headline inflation rate may subside, as it did in November on high-base effects (this is a highly technical reason, that doesn’t have real world effects on us consumers), higher labour costs due to tighter foreign labour policies and efforts to boost low-wage workers’ salaries will continue to push prices up. Profit margins will also be squeezed further as businesses (esp SMEs) are forced to invest to raise their productivity.

And he thinks cost increases are likely to be be passed on: not shumething that is likely to please consumers, who are suffering from higher COEs, and property prices, and real wages that are stagnating. PAP govt will not be too happy too with stagflation, as grumbles grow during NatCon.

Shouldn’t Jos Teo bitch about the Integrated Programmes that make PSLE such an impt exam today, rather than against employers that offer PSLE leave for their employees, and parents that take time off to coach their kids. In my time, PSLE was important to get into RI, Victoria and Serangoon English: once in if no major balls-up could do PreU in these schools (Integrated Programme is juz modern variant), but if one went to mission primary schools, going to mision secondary schools (and PreU) wasn’t that dependent on PSLE results, unless one was stupid. Things got even better when the govt started NJC. More places for PreU studies.

But then the cycle turned and now PLSE is the exam to pass.

“We are quite mistaken to behave as if PSLE is THE defining moment in a child’s development.”: Err not all parents can afford to send their kids overseas to make sure they get a good education, if the kids get culled here.

Remember me bitching in early August that MTI jnr minister Lee Yi Shyan, and the local media covering him, were misrepresenting the pix on food inflation? I had pointed out that there were reports of rising food prices.

Well now MAS validates what I was saying. MAS warned on Tuesday about upward pressures in imported food prices over the next few months and into early 2013 due to weather-related supply disruptions.

Jos has gd company. And this ST guy should be in line to be a jnr minister.

Note: Last sentence and link to Jos piece added at 9.09am on day of publication.

As a retiree, I was getting worried that PM, Tharman and gang had abandoned a Hard Truth that Dr Goh Keng Swee had laid down (and which has served us well, unlike some of Hary’s Hard Truths): Singapore’s exchange rate policy cannot be used as a tool to manage the country’s export competitiveness. It was a Diamond Hard Truth, engraved in granite, that the Singapore dollar is a key macro-economic policy tool to keep inflation under control.

Increasingly based on the comments of forecasters and the central bank’s actions, I had gotten the impression that the exchange rate policy was being used as a tool to manage the country’s export competitiveness.

Until last Friday that is, when the central bank, in a decision that surprised the market, decided not to ease its monetary policy in spite of slowing exports due to a weaker global economy. (The S$ has appreciated since January by 6% against US$.)

And the Trade and Industry Minister Lim Hng Kiang said on Monday, “The [central bank] recognises the need to strike the right balance between ensuring exporters are not unduly hurt by a stronger currency in the short-term, and capping underlying price and cost pressures in the economy. However, the exchange rate cannot be used as a tool to manage Singapore’s export competitiveness.”

Over the longer term, he added, competitiveness could only be achieved through higher productivity and innovation such as creating new products that the market demands. (Ya been hearing this rubbish since the 1980s but the new products and productivity never appear, bit like Godot)

(He could, and should, have added that S’pores exports require imports. Dr Goh used to emphasise that a cheap S$ means export costs go up because the prices of imports used to make the exports goes up. Minister Lim did not make this point. He should have reminded S’poreans of this Hard Truth.)

Mr Lim was responding to a question posed by an economic literate NMP, Tan Su Shan, who is MD of wealth management at DBS Bank. She asked if the central bank would “consider recalibrating its strong Singapore dollar policy and allow the Singapore dollar nominal effective exchange rate to appreciate at a slower pace”.

“The strengthening of the Singapore dollar is a key macro-economic policy tool to keep inflation in check over the medium term,” he added.

Many (self included) think that NatCon is Wayang. But could it be even more cynical? Is NatCon’s aim to distract us from the govt’s mismanagement of the economy. This unworthy tot struck me when I read DBS’ analysis of the S’pore economy last week.

DBS says that high inflation in recent years is mainly made in Singapore and this has affected overall competitiveness. High COE premiums and rentals, as well as the continued increase in labour cost are the key drivers. Ironically, the bulk of these were policy-induced, it said. [Translation: Inflation is fault of the govt leh]

It goes on, “The tightening in foreign labour inflow in particular, is creating significant strain on enterprises and eroding Singapore’s cost competitiveness. The near- term impact is higher labour costs, compression of profit margins and the tendency for companies to pass on this higher cost to consumers, resulting in higher inflation. Thus, in a bid to restructure the economy, growth and competitiveness have been affected, and just when the global cycle is weak.” [Translation: The govt’s policy of reducing FT inflow is making it more difficult to growth the economy]

So given that stagflation (economy not growing or is shrinking, but inflation is remains high: “Singapore’s consumer price index rose 3.9 percent in August from the year before, more than double the 1.7 percent rate in the U.S., the world’s biggest economy. Inflation in the island state averaged 5 percent for the past year<” reports Bloomberg) is the fault of the govt, what would distract the masses and netizens more than get them engaged in something irrelevant and entertaining? Even if the netizens don’t take part, they are so busy bitching abt it that they forget (or don’t realise the economy ‘s failings) to criticise and highlight the mismanagement of the economy by the government. So NatCon is the PAP’s answer, juz like in Roman times, the emperors had “Bread and circuses” to keep the rabble in Rome happy and distracted when the barbarians were crossing the frontiers?

Waz sad is that PM thinks he has to resort to gimmicks like this. He made a gd start getting rid of underperformers and supernumeries in the cabinet. He then started spending our money on making life more comfortable for us. He should execute the latter well, not get distracted by PR gimmicks. If executed well, spending more of our money on ourselves will win back the voters.

Last month when asked about the current drought in the United States Midwest which is affecting corn and soybean crops, Mr Lee Yi Shyan, Senior Minister of State for Trade and Industry and National Development and chairman of Retail Prices Working Group said it is not likely to have an impact here in the near term.

This is because Singapore imports a negligible amount corn, and only seven per cent of its soy beans from the US.

But a sustained price hike for the grains, which are used for animal feed, he said, may raise commodity prices in the long term. (More)

Funny then that on 30 August BBC Online reported

Global food prices have leapt by 10% in the month of July, raising fears of soaring prices …

The bank said that a US heatwave and drought in parts of Eastern Europe were partly to blame for the rising costs.

So the issue is not even that only in the long term food prices here will rise, but how soon. That it will rise in “the near term”, despite his denial, is a probability. Even before the spoke juz before National Day, prices had alread risen. I mean as a MTI minister, surely he would have access to that information, unless his officials hid data from him to make him look stupid?

Discounting that possibility or the possibility that MTI does not have access to near-live data (highly unlikely), either this jnr minister doesn’t know economics (maybe taz why he did not get promoted to minister?*) or he was juz mindlessly spinning knowing that the constructive, nation-building media would not challenge him, and that people would believe him.

Methinks one test of whether the government is sincere about having a national conversation is for ministers to stop assuming that the people are simple-minded to believe whatever ministers say. Those days are over. S’poreans have the internet and social media to keep tabs on waz happening in the rest of the world and in S’pore. The days when the constructive, nation-building local media filtered everything are over.

(Or “Think short-term, not long-term says minister Lee or “MTI minister does not know econs?” or “Govt’s spin machine is stuck in the stone age”)

The Retail Price Watch Group (RPWG) last week emphasised that the slower pace of food inflation impacted positively on household expenditure as food expenses take up a considerable portion of each household’s monthly budget. This slower pace of food inflation is good for S’poreans is the message that the constructive, nation-building media is spreading, not challenging. Example of how inflation is reported . At the end of this piece are two links on the numbers on inflation, and what they mean.

Earlier this year, when inflation was hitting new highs, in addition to the sick jokes by Tharman and Hng Kiang on “no worries” if “you don’t rent private housing, or want or need to buy a car”*, S’poreans were told to look forward, not back. Inflation would “moderate”. It hasn’t has it? The rate of growth has slowed a tinny winny bit, taz it.

Now the message seems to be look back, not forward. If you wonder why, read this, “Another food crisis looms”: grain and meat prices are rising fast (not rice though but note “Rising wheat prices and a failure of America’s soya harvest might scare nervy Asian countries into a rice-export ban just as during the food crisis of 2007-08.”).

And there is this: Global food prices sharply rebounded in July due to wild swings in weather conditions, a UN food and agricultural body has said.

The rise has fanned fresh fears of a repeat of the 2007-2008 food crisis which hurt the world’s poorest. BBC report

But when asked about the current drought in the United States Midwest which is affecting corn and soybean crops, Mr Lee Yi Shyan, Senior Minister of State for Trade and Industry and National Development and chairman of RPWG said it is not likely to have an impact here in the near term.

This is because Singapore imports a negligible amount corn, and only seven per cent of its soy beans from the US.

But a sustained price hike for the grains, which are used for animal feed, he said, may raise commodity prices in the long term.

So said minister is downplaying the effect of drought in the US on food prices. And our media is not questioning him. And they all are wrong to downplay the rise in retail prices.

There are floods in Brazil, the other large exporter of soya. So it isn’t juz the US.

There is no getting around the fact that two of the staples of the world food industry are about to become scarce commodities.

That means they will also become more expensive. Soya beans and corn make oil, animal feed, and ethanol (to be added to petrol), and are used in snacks, fast food, even soft drinks. America’s drought is going hit us all.

FT gave a concrete example: Based on the numbers of a big US producer of chickens, Sandersons, a US$2 increase in corn, like the one that just took place, adds about US7 cents to the cost per pound of chicken meat. And as the margins are tiny, so prices of chicken have to rise unless there is a serious recession.]

Then there is the issue of time frame. The USDA expects further rises in prices, and it is predicting that global corn trade will be sharply lower this month “in response to tighter US supplies and higher prices” reports the BBC. So minister, if “this month” is “long term”, what is “short-term”? Ten minutes?

But this downplaying of inflation and the misuse of the term “long term” is not all.

But a sustained price hike for the grains, which are used for animal feed, he said, may raise commodity prices in the long term.

So after always being tot to think long-term, and with the government always praising itself that it takes the long-term, strategic view, and taz why we should always vote for the PAP, we are now told to think short-term?

Whatever happened to thinking and planning long-term? Retired juz like one LKY?

And why is the media not pointing out and commenting the change in govmin thinking? Are they waiting for approval?

Could minister and media been trying hard to avoid spoiling the national mood ahead of 9th August?

Or waz it all, “An honest mistake?” Or is this Lee trying to ape Tharman and Hng Kiang as a standup comic?

Or, as is most likely, could the government PR and corporate communications machine still be in the pre-internet age when real-time information was expensive and limited to traders in financial institutions? Then media releases, and ministerial statements and Q&As could be crafted days or weeks ahead of time, with each officer in the pyramid making changes until the final draft reached the minister. Now when communicating to any audience, ministers and their minions must be aware that real-time info is available at a touch of the screen.

(Links on inflation

Inflation has accelerated, fueled by rising housing and private transportation costs …The monetary authority last month estimated consumer-price gains will average 4 percent to 4.5 percent this year, compared with the 3.5 percent to 4.5 percent range it forecast previously.

New finance minister in India. Previous one became president. What a country. Mismanaged the country’s finances (high inflation, falling foreign direct investment, retrospective taxes etc) but moved onto the highest post in the land.

Bit like S’pore? Tony Tan as executive director of GIC presided over purchase of “two 30-yr” investments (UBS and Citi) that tanked within months of purchase. He became president.

Seriously, the actions of new Indian finance minister is gd news for stale Indian bulls like self.

(Or, “Isn’t high inflation and misrepresenting its effects a local issue, Desmond, Tharman & PM?”)

Update on 27 May: The PAP are singing the blues! Gd for you 62.1% of voting Hougangers))))

Should rich kid Tharman (he from ACS) and poor RI boy, but now multi-millionaire, Hng Kiang (The model examplar that ministerial performance is irrelevant so long as the voters don’t get too upset?) be punished by the voters of Hougang for their tasteless jokes on inflation? Latest stats: inflation at 5.4% (even higher than March’s 5.2%)

Minister Lim Hng Kiang when explaining in Parliament why most of will not be ‘directly’ affected by inflation said, “The two largest contributors to CPI inflation are expected to be imputed rentals on owner-occupied accommodation and car prices. Together, they will account for more than half of the inflation this year. As the majority of resident households in Singapore own their homes, they do not actually incur rental expenditure. Likewise, the majority of resident households will not be directly affected by the rise in COE premiums as new car buyers make up a small proportion of all resident households. “

And a few years ago, when the price oil rise was leading to higher inflation, he recommended that people switch to “cheaper” brands, as if people don’t know that already.

According to Jentrified Citizen:Every average person whom I have talked to from the aunty who makes my favourite teh tarik to the taxi-driver say that they are feeling the pinch of inflation every single day. Most Singaporeans who pay their own bills would know just how hard inflation has hit them. The list of prices increase seems to get longer every day – the infamous housing and car/COE prices, the higher charges for public transportation (yes including taxis as they are a commonly used form of public transport), petrol, car-parking, healthcare, vitamins, medicine, groceries, food and electricity and water bills.

They are not trying to be comedians, I think and hope. Trying to be fair to them, their comments show the difficulty of representing complex arguments over policy in terms that average voters can get their heads around. Problem is that they are so out-of-touch that they end up insulting our intelligence.

But I’m sure by DPM Teo’s, extremely high standards (DPM, Png made “an honest mistake”, he is no lawyer or scholar, juz one of the “little people”, so a little inaccuracy is surely acceptable?) , they would not be men of intregity, if they were not PAP cadres and leaders.